Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20.You are in the process of buying 1,000 shares of Alpha Corp at $10 a share and adding it to your portfolio.Alpha has an expected return of 22.5% and a beta of 1.20.The total value of your current portfolio is $90,000.What will the expected return and beta on the portfolio be after the purchase of the Alpha stock? Do not round your intermediate calculations.
A) 11.42%;1.04
B) 11.54%;1.26
C) 15.07%;1.33
D) 12.15%;1.20
E) 13.97%;0.97

Question

Quizplus · Accepted Answer

The expected return of the new portfolio can be calculated using the weighted average of the returns of the individual components, and the beta of the portfolio remains the same since the beta of the added stock is the same as the portfolio's beta.

Assume That You Hold a Well-Diversified Portfolio That Has an Expected